Irrigation entitlement prices across the $14 billion southern Murray-Darling Basin (MDB) remained at record highs last year, according to Australia’s leading water markets adviser, Aither.
Aither has released its yearly Water Markets Report, which summarises water trading activity and trends.
Director Chris Olszak said the strength in water entitlement prices had been sustained, despite the low returns in selling allocations in 2016-17, due to wet seasonal conditions.
“The growth in water entitlement prices over the last four years has been driven by long-term interest from investors and corporate agricultural enterprises, resulting from opportunities for land use change in cotton and nuts,” Mr Olszak said.
“Aither estimates that water availability in 2017-18 will be between 5500 and 6250 gigalitres (GL) for consumptive use.
"Southern MDB water allocation prices opened the year around $170 per megalitre but declined steadily across the year to close on 30 June 2017, at about $40 per ML.”
Given the high level of supply, he expressed surprise allocation prices had opened so strongly.
Victorian temporary prices ranged from $100 to $120 a megalitre (ML), just before the irrigation season opening in the middle of August.
“Based on Aither’s modelling, unless very dry conditions prevail through spring and summer, we expect these prices to ease,” Mr Olszak said.
The fourth annual Aither report also highlighted the increased sophistication of water market participants, with new products like leases, allocation forwards and carryover products helping both buyers and sellers manage risk.
“For the 2016-17 water year, the total value of trade in the southern Murray-Darling Basin was approximately $612 million in entitlements.”
Allocation trade turnover was well down on the previous year due to the wet conditions.
The report also found in In 2016-17, about 14 per cent of total allocations went to the Commonwealth Environmental Water Holder (CEWH), a figure which had remained relatively consistent for about five years.
Aither’s Water Markets Report is published annually with a focus on the southern MDB.